Background

H&R Block's e-solutions software division develops and publishes consumer financial and personal productivity software. H&R Block's titles include the high-volume and seasonal TaxCut series as well as the evergreen Kiplinger's Home and Business Attorney and Kiplinger's WILLPower.

Challenge
H&R Block wanted to identify and establish a long-term relationship with a supplier that could provide total turnkey software manufacturing, support the software operations staff in the management of all aspects of retail order fulfillment including logistical planning and execution, data management flow, product returns from retailers, inventory control, and accounting. Additionally, the supplier needed to be able to work closely with the sales and marketing group in the design and printing of various product displays and marketing materials. Finally, the most critical elements for success would require integrating the computer systems of H&R Block with the entire supply chain including freight carriers; and developing the manufacturing production capacity and distribution locations necessary to beat their major competitor to market during a high-volume product rollout to thousands of retail outlets nationwide.

Solution
After considering the options, H&R Block decided it would be best to outsource their manufacturing and distribution to Gung-Ho. H&R Block's decision was made late in the season, so it was imperative that a rapid deployment strategy was put in place. In fewer than 60 days, Gung-Ho created the solution that enabled H&R Block to beat their competitor to market for three consecutive years and to consistently achieve better than 99.999% order fulfillment accuracy. Solution highlights include:

Critical Time-To-Market New Product Launch.  For H&R Block, beating their competitor to market translates to better product positioning in retail stores and thus greater sales. To be first to market, H&R Block wanted to start shipping 200,000 kits per day – including many in point-of-purchase pallet and floor displays – within two days after the software masters were ready. Gung-Ho agreed and, although many companies may promise to perform within a certain time frame, we guaranteed it by agreeing to pay a $100,000 per day penalty if we did not perform as promised. H&R Block was delighted when Gung-Ho kept its promise and successfully shipped over 1.2 million software kits to thousands of retail outlets nationwide during the first week of production. Today, H&R Block insists that its suppliers guarantee their performance. They know that if a supplier is not willing to provide a guarantee it is a good indication of how well that supplier really believes they will perform.

Direct-To-Store Retail Distribution, EDI, and Chargeback Responsibility. GUARD, "Gung-Ho's Universally Approved Retailer Direct" program, was used to provide H&R Block with the proprietary technologies and capabilities necessary to ensure that the retailer-specific packaging, labeling, shipping, and carrier requirements in the retailers' routing guides were met. Additionally, Gung-Ho used H&R Block's Sender ID to perform all of the necessary EDI, "Electronic Data Interchange," functions on H&R Block's behalf. G-EDI is an integral part of GENIE, the "Gung-Ho Enterprise Network and Information Exchange" system, and one of the methods Gung-Ho utilizes to interact with its clients and its clients' customers. G-EDI has the ability to accept and return EDI files as well as export fulfillment data in standard formats using either Gung-Ho's or the client's Sender ID (i.e., Gung-Ho can act on behalf of the client for EDI transmissions). Files may be transferred using a value-added network (VAN) provider or sent directly to an FTP address. In addition to generating customer-specific UCC 128 (including SCC-14 and SSCC-18) carton and pallet labels, GENIE transmits Advance Ship Notices (ASNs) (EDI 856) to retailers such as Best Buy, Office Depot, Staples, and Target. Gung-Ho contracts with retailer-preferred freight carriers that transmit Trailer Manifests (EDI 214). EDI transmissions (856 and 214) can be generated in versions 3010, 3050, 4010, and 4030. When EDI is used, confirmation files to clients can include an 856 ISA control number. The customer's ISA control number, denoting an Acknowledgement (EDI 997), can be reported upon receipt by GENIE. GET IT, "Gung-Ho's Electronic Transfer of Information Technology," automatically looks for new or modified EDI files every 30 seconds and GATE, "Gung-Ho's Automatic Transmission of E-mail," automatically sends an e-mail notification regarding any new or modified files. Similar to how Gung-Ho guaranteed its on-time performance, Gung-Ho also guaranteed its fulfillment and EDI transmission accuracy by assuming responsibility for all retailer chargebacks. Again, such a guarantee was not a problem – Gung-Ho performed with 99.998% ASN Transaction Set accuracy and had only one chargeback for $100.

Client-Configured Information Systems and Reporting. Gung-Ho uses two proprietary information systems to interconnect clients like H&R Block with their customers, suppliers, and employees. GENIE, the "Gung-Ho Enterprise Network and Information Exchange" system, seamlessly integrates Gung-Ho's worldwide manufacturing and distribution operations via the Internet. GENIE is maintained in a secure data center environment designed to provide high system availability, rapid scalability, and redundancy. GOLD, the "Gung-Ho On-Line Data" system, is a secure Web portal to GENIE that enables Gung-Ho's clients to use a Web browser to manage their orders on-line and receive real-time information regarding virtually every aspect of Gung-Ho's manufacturing and distribution operations. Clients with a GOLD account can easily check order status, track shipments, enter new orders, change orders, check inventory, add and update bills of materials and assembly instructions, process returns, and generate reports. Gung-Ho's clients, suppliers, and employees can also use GOLD to create, view, modify, and exchange artwork files, media masters, documents, and spreadsheets. All on-line integration and information is provided at no charge and is password protected. To satisfy H&R Block's unique fulfillment requirements, Gung-Ho used GOAL, "Gung-Ho's Order Allocation Logic." GOAL was applied to H&R Block's client-submitted orders to ensure they were routed to the appropriate Gung-Ho facility based upon product availability and shipping destination. For example, if an item was available to ship from multiple locations, GOAL routed the order so it shipped from the location nearest to the destination. If an item was not available to ship, GOAL selectively routed the order to the nearest facility that had all of the item's necessary components and created a work order to build and ship that item. GOAL also automatically selected the carrier and service type. Since H&R Block's requirement was to make sure all shipments were delivered within two days, GOAL compared the ship from and ship to locations and assigned a less expensive ground service if two-day delivery was guaranteed or upgraded the service to two-day air if ground was not guaranteed. GOAL also calculated the weight of the shipment and changed the carrier when the weight exceeded the carrier's cost-effective weight limit (e.g., GOAL changed the shipping method from UPS to LTL if the shipment exceeded 100 lbs.). Using GOAL – which is customizable by client, product line, project, release, or specific promotion – turned out to be the perfect solution for concurrently shipping H&R Block's products from multiple locations over the course of the six-month programs.

Virtually Perfect Results for Three Consecutive Years. The first year, H&R Block reported that Gung-Ho had better than 99.99999% order fulfillment accuracy after comparing their database to GENIE. During the six-month program, Gung-Ho fulfilled more than 20,000 orders comprised of more than 2,200,000 software kits contained in more than 150,000 shipping cartons with a total variance of only five kits. The second year, H&R Block reported that Gung-Ho had better than 99.999% order fulfillment accuracy. During the six-month program involving multiple international facilities, Gung-Ho fulfilled more than 23,000 orders comprised of more than 2,737,000 software kits contained in nearly 243,000 shipping cartons with discrepancies reported in only six orders. The third year, H&R Block reported Gung-Ho had better than 99.999% order fulfillment accuracy. During the six-month program involving multiple international facilities, Gung-Ho fulfilled more than 45,000 orders comprised of more than 3,502,000 software kits contained in more than 320,000 shipping cartons with a discrepancy reported in only one order (99.99997% accuracy). Gung-Ho also submitted the EDI transmissions directly to retailers on behalf of H&R Block with 99.998% ASN Transaction Set accuracy and only one chargeback for $100 (which Gung-Ho paid per its guarantee). Finally, after Gung-Ho evaluated and selected the best regional carriers, Gung-Ho's GOAL order allocation logic was used to route the orders to the most appropriate manufacturing and distribution location for faster product delivery and a freight cost reduction of over $500,000.